* Canadian dollar at C$1.0998 or 90.93 U.S. cents
* Bond prices mostly lower across the maturity curve
By Leah Schnurr
TORONTO, April 17 (Reuters) - The Canadian dollar firmed
against the greenback on Thursday after data showed domestic
annual inflation was stronger than expected in March, boosted by
higher energy costs.
Still, the loonie stuck to a tight range and trading looked
as if it could be muted heading into the long weekend. Financial
markets in Canada are closed on Friday for the Good Friday
holiday.
The annual inflation rate rose to 1.5 percent in March,
beating expectations for 1.4 percent rise, while the less
volatile core measure edged up to 1.3 percent, as expected.
"A little bit stronger than expected could put a little bit
more upward pressure on interest rates and maybe provide a
little bit of support for the Canadian dollar," said Paul
Ferley, assistant chief economist at Royal Bank Of Canada in
Toronto.
The Canadian dollar was at C$1.0998 to the
greenback, 90.93 U.S. cents, stronger than Wednesday's close of
C$1.1018, or 90.76 U.S. cents. The loonie hit a session high
shortly after the data was released.
The inflation report came a day after the Bank of Canada
flagged its concerns about the weak inflation environment, even
as it forecast inflation will pick up this year. The bank kept
its benchmark interest unchanged at 1.0 percent as it has done
since September 2010.
"It is a bit of a precarious situation for the bank to be in
because they do want to stay sidelined for an extended period of
time," said Mazen Issa, senior Canada macro strategist at TD
Securities in Toronto.
"The acceleration in inflation is occurring, we definitely
do think that inflation troughed in the last quarter of last
year, so they're going to have to tread a little bit carefully
now in terms of their communication."
Canadian government bond prices were mostly lower across the
maturity curve, with the two-year down 1 Canadian
cent to yield 1.056 percent and the benchmark 10-year
was also down 1 Canadian cent to yield 2.391
percent.
(Additional reporting by Solarina Ho; editing by Peter
Galloway)